Energy Industry Taxed More Than Other Industries - Most Provinces Fail at Creating Effective Tax and Royalty Regimes

CALGARY, Oct. 4, 2012 /CNW/ - In a report released today by The School
of Public Policy, authors Jack Mintz and Duanjie Chen offer an
international and interprovincial comparison of tax and royalty systems
impacting the oil industry.

"As a whole, Canada falls in the middle of the pack in terms of
competitiveness and economic neutrality," Mintz said today. "But within
Canada there is a great deal of disparity across the provinces - and
that disparity matters. The goal of a royalty system should be to
balance public revenues with investment. In those terms, some
provinces do well, others less so."

The authors compare the energy royalty regimes of Brazil, Canada,
Norway, the United Kingdom and the United States. They also evaluate
individual provinces (Alberta, B.C., Saskatchewan, Newfoundland &
Labrador and Nova Scotia) and states (Arkansas, Colorado, Pennsylvania
and Texas). The metric used is the Marginal Effective Tax and Royalty
Rate (METRR), which indicates the impact of taxes and royalties on
investment.

Contrary to common perception the authors find that the fiscal burden on
the energy sector is higher than that of other industrial sectors in
Canada.

Within Canada, measuring conventional production, Alberta, B.C. and
Saskatchewan actually impose the highest fiscal burdens because of
revenue based royalty regimes - this discourages investment. The lowest
fiscal burden is for offshore development in the Atlantic provinces.
Nova Scotia is the most attractive to investment based on METRR.

However, the authors argue that these numbers do not tell the whole
story. "Nova Scotia and Newfoundland are actually encouraging too much
investment in their oil industry and are poor rent collectors", says
Mintz.

Mintz and Chen contend that the regime in place for the Alberta oil
sands is in fact the closest to an optimal rent-based system. Although
the METRR for the oil sands is quite a bit higher than it is for Nova
Scotia, the regime affecting the oil sands has fewer disparities across
business activities and is more in-line with the tax burdens placed on
other industries within the economy.